Ethanol Fuels Politics out Where the Tall Corn Grows

Article excerpt

My vote is for sale. I stand ready to cast a ballot for any
presidential candidate who will do me one small favor: promise to
abolish the ridiculous federal tax breaks for ethanol used in
automotive fuel.

In Iowa recently, I looked far and wide but found no takers. We
expect pandering in a political campaign, but what the Republican
candidates were doing to prostrate themselves on this issue would
have embarrassed a medieval Chinese emperor.

Ethanol is made from corn, and Iowa is the largest
corn-producing state. Even so, it has all of 72,756 corn growers,
which is just 2.5 percent of the state's population. Neither the
politicians nor the state's voters have figured out that there are
a lot more Iowans who lose from the ethanol subsidy than there are
Iowans who gain.

The issue arose because someone noticed that Steve Forbes'
magazine had questioned the wisdom of providing special tax
treatment for ethanol. The Iowa Corn Growers Association promptly
denounced the publisher as "agriculture's worst nightmare," which I
suppose means he is worse than tornadoes, drought, insects,
foreclosure and the Russian grain embargo all rolled into one.

His rivals rushed to the attack. Bob Dole's aides claimed that
ethanol production generates $1.5 billion in economic activity in
Iowa and boasted that "Dole's support for ethanol in Congress has
been unmatched."

Not to be outdone, Phil Gramm announced, "I am an ethanol
senator." Lamar Alexander said that the idea of junking the tax
subsidy is "flat wrong" and that "anyone from the real world ought
to know that." Forbes himself was not exactly a profile in courage,
arguing only that if ethanol doesn't prove itself in the
marketplace within 10 years or so, "we should make certain changes."

This is like saying that if winter arrives in each of the next
10 years, you should consider buying an overcoat. Ethanol has been
enjoying the chance to prove itself since 1978, when the first
federal tax break was enacted. If it hasn't succeeded yet, it's
never going to.

Though the price of gasoline has fallen sharply in the past
decade and a half, after adjustment for inflation, the price of
ethanol has not. It now costs more than twice as much as gasoline
to produce.

Getting people to buy an automotive fuel that costs twice as
much as gasoline, though it is not any better than gasoline, takes
some doing. …